Joe Foster: Unfunded local government retirement and health care obligations -- a call to action

We have all seen the news reports about California cities in financial trouble, including some who have declared bankruptcy. Concerned with this situation, the board of the Santa Cruz County Business Council felt it was important to look at how unfunded pension and retiree health care liabilities could impact Santa Cruz County and the delivery of public services.

While we are confident that these matters are in the capable hands of our local officials, we felt that more information was needed. Our Government Affairs Committee contracted with Joe Nation, a noted economist and leading expert in the field of public pension analysis and reform. Dr. Nation is also a faculty member at Stanford University, former Democratic assemblyman, and has worked on public pension reform measures in Fullerton, San Jose and Orange County.

Our aim was to provide a report that is an accurate, timely and useful tool for budgetary and policy decision-making for local governments. While Dr. Nation's report is just one perspective, it clearly highlights the magnitude of the underfunding problem facing government entities in Santa Cruz County. Other communities across the state have conducted similar research to better understand their situation and form solutions that will put them on a path to financial stability.

While our local officials have taken steps over the past few years to help alleviate some of our unfunded obligations, Dr. Nation's report clearly shows that more needs to be done -- quickly. Dr. Nation lists benefit reductions, greater employee cost-sharing, and strategies to increase public agency revenue (taxes) as possible steps to tackle the problem. While all of these present significant challenges, they must be considered as possible solutions moving forward. Taking these steps will strengthen the retirement system and enable our local governments to provide satisfactory levels of service for the long term.

When Dr. Nation's report was released at last month's SCCBC luncheon, public officials had many questions and issues, all of which we believe require continued discussion and exploration. Our intent is to facilitate this discussion, because this is not an issue that is going to go away anytime soon.

By partnering with our public officials and the community we can work together to put Santa Cruz County on the right path to avoiding the devastating situations that have befallen municipalities like Stockton and San Bernardino.